Monthly Archives: November 2016

Offering India’s first-ever Platinum 4G service, Reliance Jio is becoming the spearhead of the telecommunications industry as the best 4G network with the lowest data rate. It is offering nationwide free voice calls to any network without any roaming charges.

In addition to its several feats, Reliance Jio has also become the Indian ‘4G-only’ network which is witnessing data usage of 16,000TB per day which is by far the largest data usage any carrier handles on a typical day at a global level. The company has an extensive network of 250,000 km of fiber optic cables across India and aims to accelerate the Digital movement in the country.

After taking the telecom sector with a storm by its recent launch, Reliance Jio is emerging as the winner in apps arena too. The new entrant in the communications sector has left once leading WhatsApp and Facebook behind in its first stride itself with 7 of the top 10 apps downloaded from the Google Play store in India being from Jio family. It has exclusive apps such as JioPlay, JioOn Demand, JioChatMessenger, MyJio, etc. on Google Play, which enable users to enjoy various exciting services, for instance, instant messaging, live TV, movies on demand, news, streaming music, and so on. It also gives extra discounts to the students.

Recently, the company also announced that it is offering an additional 12 months of Jio Digital Services with the purchase of all Apple iPhone models. According to a recent report, the company is also planning to launch 4G VoLTE ready phones priced as low as Rs. 1000.

According to annual Economic Freedom of the World report published by the Fraser Institute, Hong Kong has topped the list of the world’s most free economies this year. Next top four regions that have marked their positions in the rankings are Singapore, New Zealand, Switzerland, and Canada. America retained 16th position.

Down by 0.5 points from last year, this year Hong Kong scored 89.6 out of 100 points in the overall economic freedom. Singapore scored 89.4 in the rankings. Around 186 countries received rankings that were based on 10 quantitative and qualitative factors such as levels of personal choice, an ability to enter markets, the security of privately owned property and rule of law on a scale of 0 to 100.

It is noted that Hong Kong has “maintained its economic vitality” regardless of the swirling concerns related to China. It showed small improvements in areas such as business freedom, labor freedom and fiscal freedom.

One of the spokesmen of the Hong Kong government affirmed that the government is very happy with the ranking. In one of the interviews, he said, “The government will continue to uphold our fine tradition of the rule of law, a clean society with a level playing field, an efficient public sector, and a simple tax regime with low tax rates.” He also remarked that in a world of keen competition, they cannot afford to be complacent.

According to the list, the least free economies were countries such as Central African Republic, Argentina, the Republic of the Congo, Libya, and Venezuela whose scores were around three.

This application is a one-stop-shop that makes planning, organization and management of trips easier. Just select the destination and create a trip by assigning dates. With Google Trips App booking of tickets and hotel rooms will be done with a few clicks. This application is not just for collecting information – it can also make suggestions. Through the ‘To Do’ tab one can get the best suggestions about what can be explored during the trip.

This app serves as a perfect trip planner and travel guide for every person who is fond of exploring places. Available on Android, this free app offers editorial guides for more than 200 cities, and makes personalized recommendations on the basis of one’s Google history. Users will be required to log into their Google accounts for the app to work.

One of the most attractive features of this app is that it works offline as well and one can download everything to his/her phone before leaving for any destination. The app includes maps and walking directions which scraps the compulsion of using an expensive international data plan for people.

Richard Holden, Vice President of Product Management at Google Trips stated in one of his interviews that the Google’s Trips App is a culmination of more than two years of work in the process of improving Google’s travel products. The focal aim of this new travel app is to take away all the pain of planning for a vacation. Also, in the recent months Google has introduced Destinations, a travel-planning feature inside mobile search, and revamped its hotel and flight search features.

In a historic referendum, Britain opted out of the 72-year-old treaty with the European Union on June 23, 2016. 72% of the British population came out to vote for the crucial decision and 51.9% opted to leave the European Union.

While England and Wales came out in strong support of the Leave side with 53.4% to 46.6% and 52.5% to 47.5% respectively, Scotland and Northern Ireland favored to stay in the Union. Scotland backed Remain by 62% to 38%, while 55.8% in Northern Ireland voted Remain and 44.2% Leave.

Britain’s decision to exit European Union – called Brexit – wasn’t taken easily by the world economy, and it affected Britain’s economy adversely. As a result, the Pound fell to its lowest level since 1985. David Cameron, then Prime Minister of Britain resigned after the referendum that called for Brexit. Though the referendum was his prime agenda in his election manifesto, he wasn’t satisfied with the historic verdict. In his own words, “I do not think it would be right for me to try to be the captain that steers our country to its next destination.”

After David Cameron’s resignation, a new Prime Minister – Theresa May – has been elected. She was the former home secretary. Though May favored the Remain side, after her election as the Prime Minister she said that she would respect the will of the people. She has said that she intends to trigger the leaving process by the end of March 2017. Thus, the UK is expected to leave the European Union by the summer of 2019.

Turkish Defense Ministry has fired or suspended over 4,200 military personnel since the failed coup attempt this summer. Many teachers, doctors, nurses, and others suspected of having ties to Muhammed Fethullah Gülen, the alleged man behind the coup attempt, have also been dismissed.

The attempted seizure of the government by military took place on the evening of July 15 with the rebels attacking government institutions and clashing with police and civilians in the streets. Severe violence erupted in Istanbul and the capital city Ankara. The ill-fated Friday saw the killing of more than 260 people and around 2,200 were injured. The attempt was prevented by the military loyal to the government along with police units and millions of people in favor of democracy.

In another development, EU Commission VP has stated that the role of Gülen’s terror group in the coup attempt is not deniable. During a visit to Turkey in late September, British Secretary of State for Foreign and Commonwealth Affairs Boris Johnson too had mentioned, “The incidents in July were absolute violence, anti-democratic and ill-minded and the best approach would be suppressing this. Now, we must take a serious look in our own country for any signs of the Gülen organization.”

Narendra Modi can be banked upon one thing for sure – changing India for the better! He is one Indian leader who has been working to change things domestically and internationally for India without any fear. He has been consistently bold and revolutionary in cleansing and purifying the system. He has definitely taken some drastic measures trying to improve things; and without doubt, India needs these drastic steps to further improve its current political and economic scenario. The latest step of demonetisation was daring, which definitely shook things up, but all for a positive cause.

The night of November 8, 2016 is still fresh in most people’s memory, when Narendra Modi announced that all 500 and 1000 rupee notes would cease to be legal tender past midnight. Though most Indian political parties reacted that the manner of announcement without prior notice or planning was wrong, everyone agreed that the motive of demonetisation was right, and there was praise all along.

Mostly, people have saluted the PM for this historic move, which will surely make the future of India cleaner and more transparent. People understand that every change is difficult in the short run. They must also be confident that long-term gains are in the offing. Demonetization is always challenging in the short run, and can definitely turn advantageous in the medium and long run, if followed by the right policy measures.

As a matter of fact, demonetisation of Nov 8 was definitely inconvenient. The ensuing cash crunch was natural, as suddenly 86% of the currency in circulation ceased to be legal tender. However, it is important to understand demonetization better by analyzing its advantages and disadvantages.

Arun Jaitley, the Finance Minister of India has asserted that, “Demonetisation should be seen according to the effect on the economy. No doubt we will continue to be the fastest growing major economy. When you are in a cusp of history and you look at the long-term impact of these steps which are going to be taken, I think India is going to become a society in the long term with a certainly better GDP, cleaner ethics, a cleaner economy.”

DEMONETISATION AND INDIA

The current demonetisation move is a master stroke as simultaneously the following were targeted: a) Eliminating fake notes, b) Restricting generation of black money, c) Restricting terror funding and other subversive activities, d) Encouraging people to disclose all income and pay tax, e) Becoming more cashless and digitized, and f) Hitting the parallel economy.

Demonetisation is not new to India. It has been resorted to twice previously to combat tax evasion and the consequent black money – in 1946, which was before independence, and in 1978 by the Janata Party.

Irrespective of its impact, the current demonetisation is a golden opportunity to start afresh. The Indian economy has obtained a never-before chance to “restart”, where it can reset or control extensively elements of the economy such as liquidity, inflation, and even fiscal and external deficit. As the rate of outflow will definitely be lower than the rate of inflow, the deposits can be specifically utilized towards infrastructure, education, roads, defence, energy, health, housing and facilities for the underprivileged. It’s a great opportunity for various economic reforms.

Finally, demonetisation should not be construed as an end; it is a means to a greater end. Thus, it must be complemented by other policy measures to achieve its objectives.

CRITICISM OF DEMONETISATION

It must be accepted that it was definitely poorly planned and had a paralysing effect on economic activities in the short term. India is a cash-based economy where close to 83 percent of transactions materialise in the form of cash. As a result of demonetization, a cash deficit to the tune of Rs 8.5 trillion or 5.7 percent of the GDP is expected to materialise in the third quarter of FY17, which will reduce but continue into the fourth quarter of FY17.

Let’s look at some salient criticisms:

Wedding dampener: In India, cash is the only mode of payment for most petty products and services for marriages. However, social evils such as dowry and unnecessary expenses were hit.

Shrinkage of informal sector: The informal sector accounts for more than 40 percent of India’s GDP and provides employment to close to 80 percent of the labour force. Now, from the third quarter of FY17 to fourth quarter of FY19, the share of the informal economy in India could shrink from 40 percent to 20 percent, which would result in a short-term adverse effect as employment would reduce. However, it’s a great opportunity to set things right in the formal sector.

Rural woes: People in villages and semi-urban areas were the worst hit as they are almost entirely dependent on cash. However, it is a great opportunity to penetrate into these areas and teach the people the goodness of digitization, the organized sector and the banking system. Overall, the rural population has taken well the idea of India as a future digital economy.

Low economic growth: This is one of the biggest threats. Former Prime Minister Manmohan Singh, also an economist, has already suggested contraction in GDP by 2 percent. The Reserve Bank of India in its policy statement has also cut down growth forecast to 7.1 percent from 7.6 percent earlier for the current fiscal year.

Increase in unemployment: According to CPM’s Sitaram Yechury, since 8 November, four lakh jobs have vanished, and more will follow in construction and allied sectors, jewellery, textiles, leather and real estate.

Cost of printing new currency: This is an additional cost to the exchequer and entirely unnecessary. However, it should motivate India to go digital.

SHORT- AND MEDIUM-TERM BENEFITS

Every criticism of demonetisation is valid; however, it’s not devoid of positives. Demonetisation was a calculated move though the timing may not have been perfect. About five months back, the Income Declaration Scheme for all citizens was launched. Before that, Jan Dhan Yojana had already been implemented. Other policy measures to complement demonetisation include Revised Double Taxation Avoidance Agreement (DTAA) with Mauritius and Cyprus, The Benami Transactions (Prohibition) Amendment Act, 2016, and Pradhan Mantri Garib Kalyan Yojana (PMGKY), 2016.

Let’s consider some short- and medium-term benefits:

Counterfeit and unaccounted notes: Deep-rooted fake notes and unaccounted cash of the past many decades were tracked. Either they came back into the system, or became detritus. However, banks struggling because of NPA (non-performing assets or bad loans) have money to lend for agriculture, infrastructure, and social sector, as also for trade and industry.

Black money: 40 years had passed since the last demonetization, and a large amount of black money had been generated. Black money can’t be wiped out totally from the economy; however, gradual and slow processes will never be able to hit the black money generation in a way this latest demonetization move did. Further, the psychological strike on black money has deeply demotivated the generators and hoarders of black money.

Boost in deposit base as well as financial savings: The total deposits in banks after demonetisation crossed Rs 12.44 lakh crore on December 10, 2016 according to data released by Reserve Bank of India. This has helped people switch from holding unproductive physical assets to financial assets.

Reduction in lending rates and improved monetary transactions: With the rise in deposit base with the banks through CASA (current accounts, savings accounts), the blended cost of funds has come down, and so has the cost of borrowing. Consequently, several banks have lowered the interest rates.

Marginal Cost of Funds-based Lending Rate: MCLR has reduced the lending rates and will boost the economic activity in the medium-term.

Strong bonds: Higher bank deposit base would lead to higher SLR (statutory liquidity ratio) demand. Anticipation of monetary easing will further support bonds.

Real estate: Prices are down and would become more realistic in the future.

Terrorism: An important source of funding of terrorists is black money and counterfeit money. Demonetisation and slow release of new notes also helped in this cause, as no cash was available for funding terrorist activities.

Gambling and Money laundering: Will be discouraged as they thrive on cash.

Discouraged drug peddling: Demonetisation made it hard for drug peddlers to demand and supply products.

Increased Tax Collection: As per Data from the Urban Development Ministry for November 2016 showed an increase of 268% in tax collection by 47 local bodies, as compared with November 2015. Also, till December 19 2017, direct tax mop-up rose 14.4%, indirect tax grew 26.2%, central excise was up 43.3%.

Others: Black money is also used to inflate prices of major assets such as real estate properties and gold. This will take a back seat for some time.

LONG-TERM BENEFITS

Actually, demonetisation has provided the government and the Reserve Bank of India an iron ladder which, if utilized properly, may take the Indian economy higher than just being the world’s fastest growing economy. It’s time to become the most robust, most digitized and the most advanced economy in the world.

Banking liquidity: Increased considerably, now the money can be largely supplied back into the system through ATMs in a calculated and controlled way. The total liquidity in the economy can be controlled.

Banking the unbanked population: Banking habits of the entire population will improve. Opening bank accounts has almost become mandatory for every citizen. Those who can’t open bank accounts on their own, are being provided these by the government as Jan Dhan accounts.

Disclosures and income tax paid: Of course, not all black money returned due to monetisation. However, whatever was disclosed and income tax paid on that, was a positive. This should help cushion the government’s FY17 fiscal deficit target.

Formalisation Effect: Going digital would greatly enhance Indian economy’s chance to transform into an organized economy. This is likely to enhance the government’s ability to tax commercial transactions resulting in a structural improvement in tax to GDP ratio in the economy.

Improved international image: India’s position on transparency and corruption at the global stage will improve adding to its investor appeal.

New income tax payers: The number of new income tax payers as well as the magnitude of reported and taxable income will rise.

Financial inclusion: The new notes with higher security features will make the economy more transparent. Digital transactions will rise dramatically. India has the potential for digital financial inclusion.

DIGITIZATION DRIVE

One of the biggest advantages of demonetisation is India’s expedited movement towards digitization. After the successful drive of Aadhaar Card, maximum digitization is possible. Besides banks, online wallet companies including Paytm, MobiKwik and FreeCharge will support.

Positives of digitization: a) Log of every purchase, b) Increased tax revenue, c) No deposits or withdrawal of currency, d) Money will be constantly in circulation or in the bank, e) Chance to lower taxes, f) Billing would increase, g) Cost of printing currency would reduce, h) Bribes will reduce, i) Tax avoidance will decrease, j) Misuse of laws would reduce, k) Social evils would reduce, and l) Day-to-day life would become easier.

Caution in digitization: To increase trust and reduce frauds in digital payments, cybersecurity systems must be strengthened considerably. Inter-operability of the payments system must be ensured and the newly created Unified Payment Interface (UPI) system must be popularized. However, cash is not bad. Public policy must balance both cash and digital payments. Transition to digitalisation must be gradual, inclusive and not controlled, and digitally deprived must be supported.

SUGGESTIONS AND RECOMMENDATIONS

If India focuses on the right policies and measures, it will improve the economic condition at an unprecedented scale. The potential benefit to India and to the world is incalculable. India needs to seize opportunities by making smart investments in the right things boldly.

The following must be done immediately: fast, demand-driven remonetisation, a push to digital payments using incentives, bringing land and real estate (the long-suspected, main parking slot for black money) under the goods and services tax (GST) net, lowering tax rates and stamp duties, and improving the tax system.

In addition, the RBI should guarantee the public the amount of currency that the latter wants. The early elimination of withdrawal limits will build confidence; there should be no penalties on cash withdrawals. Tax reforms must be implemented and tax administration must be improved. For inclusive growth, the poor must be distributed subsidies through the Jan Dhan Aadhar Mobile mode (JAM).

Through other measures, people must be prevented from parking their savings in physical assets such as gold and real estate. The government must keep a tight leash on the corruption front. Low bank penetration in the rural areas and low financial literacy must be improved. Government must immediately generate a lot of employment opportunities by lending massively to the infrastructure sector.

India’s cash-to-GDP ratio is as high as 12%, roughly three times of even developing countries like Brazil and South Africa, as cash accounts for 98% transaction volumes and 68% of value. This needs to be reduced. There must be bold cut in tax rates.
CONCLUSION
Though India’s economic growth is likely to dip to 6.5 per cent this fiscal, it must rebound to 6.75-7.5 per cent in the next financial year, a number that largely agrees with IMF forecast of 6.6 percent. According to Chief Economic Advisor, Arvind Subramanian, “Even under this forecast, India would remain the fastest growing major economy in the world.”

Further, as per Economic Survey 2007, “Over the medium run, the implementation of GST, follow-up to demonetisation, and enacting other structural reforms should take the economy towards its potential real GDP growth of 8 per cent to 10 per cent.”

Significant financial data has been collected through the demonetisation drive. Similar to the population census data – where over a period of time relevant calculations are made, and appropriate policy measures or decisions are taken – this financial data would go a long way in improving financial conditions in the economy, making financial reforms and taking action against errant depositors.

And then, of course, as Mahatma Gandhi said, “A right cause never fails”.

DOMESTIC SUPPORT

Adi Godrej (Chairman of Godrej Group): “Demonetisation is a good move for long term growth.”

Pankaj Jain (Group CEO, Logix Group): “Recent demonetization would not only bring more transparency and enhanced financial discipline in Indian economy but would also open the doors for a host of opportunities to new-age start-ups and entrepreneurs.”
INTERNATIONAL SUPPORT
World Bank President, Jim Yong Kim said, “I am a big fan of Modi!”

Washington Post: “… initiative is ambitious and … a crackdown against black money.”

The Independent: “Modi does a Lee Kuan Yew to stamp out corruption in India.”

Bill Gates: “It will help India move from shadow to a more transparent economy.”

India has been designated as the world’s fastest growing economy with the World Bank’s projection of its growth rate at 7.3% for the year 2018.
The World Bank is an international financial institution that provides loans to countries of the world for capital projects. The Global Economic Prospects is a World Bank Group flagship report that examines global economic trends, developments and prospects, with a special emphasis on upcoming markets and developing economies.
After five consecutive slow quarters, India’s GDP growth bottomed out in the middle of 2017 and finally rose vigorously in 2018. This acceleration of pace for India in the current fiscal year is supported by strong private consumption and increase in public spending on wages and infrastructure investments. Moreover, private investment is expected to revive as the private sector adjusts to the Goods and Services Tax and a global trade recovery lifts exports. India is said to be growing at a rate faster than its assessed potential.
Ayan Kose, Director, Development Prospects Group at the World Bank stated, “India’s economy is robust, resilient and has potential to deliver sustained growth.”
He also added, “In terms of economic growth, the fact that India is able to deliver a robust consumption growth, robust investment… All these are good news. The big issue is now that India has a potential to sustain this growth and we are optimistic about India to realize that potential.”

Reported in June 2018, a sell-off of Chinese stocks due to the trade war between the two biggest economies of the world has resulted in lowering Asian equities to a 4-month low. United States President Donald Trump has further threatened new tariffs on Chinese goods. A 10 per cent imposition on $200 Billion worth goods is expected as a comeback to China’s decision of raising tariffs on $50 Billion U.S goods.

China has warned Washington that it will take substantial measures if any more additional list of tariffs on its products were published. Asian Economies like Taiwan, South Korea and Southeast Asia are among the largest exporters of “intermediate goods” to China, which is the assembler of those pieces into finished products and ships
them to destinations such as U.S. Hence, these economies become the most susceptible to the trade-off and likely to get badly affected if the tensions between the two countries heat up any further.

Furthermore, trade frictions are evident by the blows on the financial market, and have created an increasingly nerveracking situation for investors and businesses that fear a fullfledged trade-off could derail global growth.

Morgan Stanley Capital International’s broadest index of Asia-Pacific shares outside Japan lost 1.2 per cent to its lowest, dragged by a fall in Chinese shares.

India is now the 6th wealthiest country in the world with fortunes raised massively from the year 2016 to an astounding $8,230 Billion in 2017.
It has been rated as the best performing market globally.
New World Wealth is a global wealth intelligence and market company that specializes in ratings, surveys, country reports and wealth statistics. It uses the total wealth of a country as an indicator
to assess the economic patterns and determine the wealthiest of nations, and refers to the fortunes owned by all individuals living in each state, city or constituency. It includes cash, property
stocks, and business interests and excludes government funds.
According to their recent report, during the review period 2006-2016, India’s volume of High Net Worth Individuals (HNWIs) increased by a whopping 290% and is the 9th largest in the world. The acquisition of this wealth is mainly attributed to the following Industries – Manufacturing (18%) followed by Basic Materials (15%), Technology (10%) and Financial and Professional services (10%).
Statistics as of 2017 show that 330,400 HNWIs reside in India, which is one of the highest in the world. There are also at least 119 billionaires living in the country, and the number is again much higher in contrast to Germany, Canada, France, Australia China and Russia.
The report stated that with India’s massive entrepreneurial population, a good educational system and an English speaking population, private wealth will grow by 200% over the next ten years with growth in financial services, Information Technology, Business Process Outsourcing, Real Estate, Healthcare and Media Industries.

State Bank of India (SBI) Managing Director B. Sriram will serve as the CEO of IDBI Bank for tenure of 3 months following a special order by the GOI.

The appointment was passed on through an official order and is the first lateral shift of senior management in decades. The vacancy for the top position opened after its CEO Mahesh Kumar Jain was named Deputy Governor of the RBI by the Appointments Committee of the Cabinet, which decides appointments to several top posts under the Government of India and is composed of the Prime Minister of India, who serves as the Chairman of the committee.

Jain has been a part of the IDBI Bank since March 2017 and was previously CEO at Chennai based Indian Bank. Jain has been appointed the 4th deputy governor’s post which lay vacant since SS Mundra retired in July 2017.

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